Question

Jack Company is a corporation that was organized on July 1, 2011. The June 30, 2016, balance sheet for Jack is as follows:
The experience of other companies over the last several years indicates that the machinery and equipment can be sold at 130% of its book value.
An analysis of the accounts receivable indicates that the realizable value is $925,000. An independent appraisal made in June 2016 values the land at $70,000. Using the lower-of-cost-or-market rule, inventory is to be restated at $1,200,000.
Calway Corporation plans to exchange 18,000 of its shares for the 120,000 Jack shares.
During June 2016, the fair value of a share of Calway Corporation is $270. Acquisition costs are $12,000.
The stockholders’ equity account balances of Calway Corporation as of June 30, 2011, are as follows:
Common stock ($10 par) ................. $2,000,000
Paid-in capital in excess of par ................ 580,000
Retained earnings ..................... 2,496,400
Total stockholders’ equity ................ $5,076,400
Required
Record the acquisition of Jack Company by Calway on July 1, 2016. Use value analysis to support the acquisition entries.


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  • CreatedApril 10, 2015
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